How to get CFO-level strategic advice without the CFO

Managed financial solutions provide an avenue for companies to outsource their entire accounting and finance function. In part, it means that companies can hand off the responsibilities for their accounting processes, including billing, accounts payable and disbursements, payroll, month-end close, reporting and, most importantly, time spent on oversight.

But at its core, managed financial solutions is more than an outsourcing of transaction processing.

“Our clients are seeking interactions that are less administrative and more advisory,” says Dave Houston, CPA, a senior manager at Clark Schaefer Hackett. “We’re able to provide our clients with real-time collaboration, to provide business insights and solve problems.”

Smart Business spoke with Houston about managed financial solutions, where it’s the right fit and how to get the most out of the relationship.

What does a relationship with a managed financial solutions provider look like in practice?

In a managed financial services relationship, organizations are provided with a team that builds a relationship with critical operational and executive leadership during the onboarding phase. This team remains consistent and functions as a peer to the organizational leaders they serve, allowing them to challenge leadership to rethink how they see their organization and how they make decisions. This is necessary in creating an environment where challenging conversations are had at the right time, and root issues are exposed quickly.

Companies that would engage with a managed financial solutions provider could benefit from CFO services, but they’re not necessarily in a position to add a CFO as a full-time position. Bringing that CFO-level functionality into the business through an outside provider means using those numbers as the basis to talk about strategy, modeling out possibilities to inform organizational decision making based on the company’s strategic plan. And where companies don’t have a strategic plan, managed financial solutions providers, because of that CFO aspect, can help create one.

Who typically uses managed financial solutions and why?

Often the best candidates are those whose growth trajectory requires that they begin to think bigger picture, better define their place in the market and how they’re going to move forward. They need better financial clarity but their size might mean hiring full time for accounting and financial roles is limited by cost. Still, these organizations need more expertise related to their industry, and would benefit from knowledgeable consultants who could offer comprehensive solutions to complex hurdles facing the business.

It’s also for leaders who find themselves spending too much time in the business processes and not enough time working on the business and doing the long-term strategic planning necessary to take it to the next level.

For certain industries, such as nonprofit, it makes more sense to maintain a managed financial solutions model as a permanent solution for their accounting and financial needs. In these settings, company leadership can focus on mission-critical tasks, then lean on an accounting services provider to handle the financial administrative work and the financial steering of their mission execution.

What should companies look for in a provider?

When searching for a provider, look for a partner — a firm capable of establishing a relationship with the right levels of communication and trust.

Also, business owners should look for industry experience and a firm that has a suite of advisory offerings that can complement the accounting and finance functions. A company’s services can be enhanced by the firm’s expertise in these areas, putting more eyes on the business, which leads to more proactive advice.

Fit is crucial because business owners need to have a strong relationship with their service provider. A provider should be trusted enough that it eliminates the need for an owner’s day-to-day oversight. But that shouldn’t eliminate the need for the owner’s participation, as their input is key to making financially sound business decisions.

Insights Accounting is brought to you by Clark Schaefer Hackett

Take a close look at your business to keep it moving forward

To increase your company’s odds of surviving the pandemic, you need to take a very close look at what you are doing today — and what you should be doing going forward.

“Understand the basics of your business, assess the damage that has occurred, reflect on the past, present and future of your business and embrace the new day,” says Betty Collins, director at Brady Ware.

Smart Business spoke with Collins about the things you can do to help your business thrive.

Where should business owners start to address a changed environment?

If you want answers, you need to ask questions. What are the basics of your business? You may think you just need revenue, but do you have the right revenue? Are expenses in line with revenue? And don’t forget to account for debt and what you take out of the business.

Also consider:

  • Your customers. How have they changed? Are they going survive?
  • Your partners. Your advisers need to be engaged in this moment, because there is a tremendous amount of information. Staying with a partner just because you always have could be costly.
  • Your vendors. Will they still be around in six months? If they pivot to survive, can they still play a role in your business?
  • Your marketing. How does that need to change? In restaurants, if you are planning on dining in to carry you, you’re in trouble. And if you’re not doing curbside and are still marketing buy-one-get-one-free coupons, that doesn’t work.
  • Your company structure, business model, budget and leadership team. Are they still right in the COVID era?

What is the next step after that initial dive into business basics?

Assess the damage, keep moving forward, plan and map it out, and remember that hope is not a strategy.

Look at how much revenue you’ve lost and how many of your customers are out of business. Is your cash higher, or lower? If you’ve taken PPP money, have you taken into account paying taxes on that?

Forecasting and budgeting are not optional. Your cash flow may have improved, but is that because you’re not entertaining and you’re not traveling? You’ve saved that money, but you’re not out establishing relationships.

Slashing inventory and letting employees go may also have improved cash flow. But do you have the capital to rebuild inventory, hire back employees and get back out into the marketplace? Your cash flow may be giving you a false sense of security.

How should an owner look ahead?

Look beyond 2020, beyond a COVID vaccine. Some things will go back to the way they were, but others won’t. Determine the things that won’t and adjust accordingly. When restaurants go back to full capacity, people won’t want to eat in. And they won’t go to events with 100 people.

You need to think of different ways to get customers. Ask what opportunities were created because things have changed and what opportunities you may have missed out on, and take advantage of them.

How can owners reset, both businesswise and personally?

It’s a new day, and you have to embrace that. But you also need to deal with fatigue. Shut down social media and try to stay positive and energized. Replace the things that have been taken from you and find things that bring happiness.

If you don’t have the mindset that this is a period of renewal and reflection, you won’t be able to assess where your business is. And if you don’t assess and adjust, if you don’t face the reality of this new environment, you risk losing everything.

Insights Accounting brought to you by Brady Ware

Lack of cybersecurity could threaten key partnerships

When it comes to small businesses, possibly only 10 percent of them have a robust cybersecurity plan in place. That’s concerning considering some cyberthreats could introduce a catastrophic event, one that could cost a company its biggest clients, or sink the business entirely.

Additionally, there’s an expectation that there will be more third-party compliance agreement requirements in the coming years — where larger businesses insist companies in their supply chain meet a certain cybersecurity threshold.

“We’re already seeing that,” says Ross Patz, CHFI, CEH, IT & Cybersecurity Manager at Clark Schaefer Consulting. “Large businesses are requiring their vendors to complete a third-party risk assessment. And so the critical question becomes, can the business pass muster — does it have protocols and protections in place to withstand a variety of cyberattacks and mitigate risk to an acceptable level? If not, it could cost them the relationship.”

Smart Business spoke with Patz about the cyberthreat environment, third-party compliance, and how companies with limited resources can protect themselves and preserve their client relationships.

What are the more significant cybersecurity concerns?

At the end of last year, much of the conversation around cybersecurity was related to reports of malicious chips in the supply chain of major companies. There were also conversations about cryptojacking, which means injecting malicious code into website ads that try to use the host computer to mine cryptocurrencies such as Bitcoin and Manero. Bad actors were also using techniques such as virtual credit card skimming by injecting code into online shopping carts.

Today, the move to remote work has opened the door to new types of threats that are designed to exploit the current business models. Companies that had a pandemic plan, one that included cybersecurity risks, have largely been prepared to mitigate the new threats. Those businesses that didn’t have a plan now have to come up with strategies, ideas and business processes on the fly, which tends to breed vulnerability.

What’s the risk of being unprepared?

More and more, organizations are implementing and maturing third-party risk management programs. These are typically larger and/or regulated companies that require third parties to complete a questionnaire that assesses their cybersecurity risk rating. That rating is based on how well companies can protect themselves against cyberthreats.

That could put smaller companies in a tough spot. Executing a robust cybersecurity program can be difficult when resources and expertise are thin. And hiring a chief information security officer is often prohibitively expensive. Still, companies need to put together an information security program that meets the standards of third-party risk management requirements, or risk losing the business.

How can companies deal with these threats?

A well-executed cybersecurity program is the best weapon against cyberthreats. Building one that’s effective means both understanding the threat environment and designing processes and policies to mitigate that threat.

Smaller companies will often say that cost precludes them from implementing a cybersecurity program. But in reality, with larger clients requiring a certain level of competency, that potential loss of revenue is even more difficult to afford.

Companies without the capability to deal with these threats internally can turn to outside providers to provide that advisory role affordably. In these arrangements, there are regular checkups — sometimes monthly — to address issues and keep track of plan progress. Cyberthreats are a moving target and companies can always benefit from regular reviews and strengthening their position as new threats appear.

Businesses don’t have to become cybersecurity experts, but they’re going to be held more accountable for their cyber defenses. Fortunately, there are organizations out there that can help.

Insights Accounting is brought to you by Clark Schaefer Hackett

Your contracts may contain risks you aren’t even aware of

If you haven’t recently reviewed your contracts, you may unknowingly be taking on responsibility for another party’s cybersecurity risk.

“If you’re signing contracts without legal review, or haven’t reviewed long-standing contracts, you’re likely carrying more liability than you think,” says Paul Hugenberg, III, CISSP, CRISC, CISA, principal, director of cybersecurity services at Rea & Associates. “Cybersecurity laws are quickly changing, and it’s incredibly important to know your industry. You need to have a clear understanding of your contracts and the risks they may be subjecting you to.”

Smart Business spoke with Hugenberg about understanding the cybersecurity risks contained in your contracts and how to avoid being held responsible for another party’s mistakes.

What clauses may be contained in contracts that could make a company liable for the actions of another business?

Entering into contracts is an everyday business activity, and their terms define what your duties are, what you’ll deliver and what your partner will pay for your services. In most contracts, you accept or assume that your partners accept liability for statutory or regulatory control for the data they will take possession of.

For example, in health care, a third-party vendor is held to similar HIPAA privacy standards over patient data as the health care provider. In that case, you need to ensure your business isn’t taking on all of the liability. If the contract language pushes all the responsibility onto you and the health care provider violates HIPAA, you may be liable, even though you didn’t necessarily do anything directly to put the data at risk.

In another example, if you’re buying a business, you’re often acquiring all of that company’s regulatory liability. Unfortunately, too many people fail to consider the cybersecurity liability exposure that is in that company’s contracts.

It is critical to clearly delineate who’s responsible for what.

Why is cybersecurity in business contracts a growing issue?

Most industries haven’t transitioned to the speed and velocity of cyber regulations, which are involved in almost every type of transaction. Templated contracts haven’t kept up with the changes. Every industry has data, and liability has shifted without people realizing it. Every contract needs to be reviewed annually for cybersecurity liability.

In addition, business owners — especially those of smaller businesses — are focused on turning out their product or offering their service, not on their cybersecurity risk. Companies are signing agreements that are not being vetted and they are not aware that they have taken on all of the liability of another business if there is a breach.

How can business owners protect themselves?

First, understand the laws and regulations around the space you’re operating in. Laws are constantly changing, and laws vary by state. Reach out to a specialist in your space, whether that’s an accounting firm or an attorney.

Then conduct an annual risk assessment. A specialist can uncover risks that aren’t on your radar when engaging third parties and isolate where the gaps are in cybersecurity liability. Ideally, this should be done before signing contracts, or at least before a problem arises. Too often, businesses do not review contracts until an issue arises.

It’s critical to immediately review all of your contracts for indemnification and liability clauses. You may be carrying more liability than you think, and it may be time to renegotiate.

And before you sign other agreements, have them reviewed by someone with knowledge of cyber security in contracts.

Insights Accounting is brought to you by Rea & Associates

How the pandemic has impacted how companies do business

With many companies experiencing a decrease in business, owners are looking for ways to decrease their expenditures.

“It’s important for companies to look at where they are now, not where they were a year ago,” says Sam Agresti, director at Brady Ware & Co. “Businesses need to examine every aspect of their operation and make adjustments in light of the pandemic.”

Smart Business spoke with Agresti about what to consider to survive in the midst of ever-changing conditions.

What environment are businesses currently facing?

Companies are facing are two very different situations. Many have lost revenue and are struggling. They have fixed overhead costs, but their volumes are down. And their employee counts are too high for their current situation.

Others have pivoted and are bringing in more revenue than they were previously. They’ve learned to be more efficient in their systems, their technology and their human capital.

In both situations they are at a fork in the road and must consider all of the metrics of their operations. When things are going well, it’s easy to increase spending without much thought.

Look at revenue per employee. How has that changed? Evaluate fixed costs such as rent and utilities. Do you need as much space?

You may not be able to change these things in the short term but they should be on your radar for the long term.

Then evaluate variable costs. Review contracts to determine if you may not need those products or services any more. And if you do, renegotiate those contracts where you are able.

Some companies are taking a central spending only policy, going through their expense structure to determine what is essential. For example, a business may have been considering an upgrade to its IT systems but now is pushing that off in favor of maintenance.

Organizations need to realign to adjust for how things have changed and optimize those things they can impact. Look outside your traditional products and services at different ways to make money. That may mean pivoting and exploring opportunities in new markets or diversifying.

How can an outside adviser help a business assess where it can right-size?

An adviser can help analyze a company analyze where it actually is today, vs. where it may still see itself from a year ago. That can be difficult for an insider who has been there for years to see clearly.

This is not the not the time to be shooting from hip. An adviser can help you be intentional about what you are doing and use data to make projections and benchmark expenses. That person can help you see opportunities you may not have considered and identify all possible outcomes.

A professional can also help identify business that is unprofitable. If it is not profitable, there may be a strategic reason to keep it, such as spreading overhead. But if a company is just trading dollars to keep people busy, it may be time to drop that account.

How does right-sizing impact a business’s culture?

A lot of bad cultures have been exposed during the pandemic. And if you’ve made personnel cuts, the people who are left may think the company is in trouble and jump ship. Be transparent and communicate daily with employees about where the company stands and what that means for them.

It’s critical to take a fresh look at your business, where the money is coming in — and where it may be unnecessarily going out. Make adjustments to the financials, to banking, to expenses and to employee structure to get to the right size for where you are now.

Insights Accounting is brought to you by Brady Ware & Company

Preparing for a sale early could mean more than a high sale price

Business owners who intend to sell their company should operate with the goal of maximizing its value as early as possible in the business life cycle. By doing so, an owner can reap the benefits of the operational and cultural improvements, and have more control over how, when and to whom they sell their business.

Alternatively, those who wait to prepare their business for a sale will find it’s a lot of work to do in a short period of time. Catching up will tax an organization, distracting from its core business, likely leading to a decrease in potential market price.

Smart Business spoke with Jim Barney, President of Advisory Services, Clark Schaefer Hackett, about the ways owners can prepare their business for a sale.

What preparations should be made before putting a company on the market?

It’s important that prospective buyers walk away from diligence confident in the strength of the business, so they’ll want to see that all the standard information needed to examine the business is available and organized.

Buyers are looking for clean and consistent financials. Volatility in the balance sheet, such as frequent write-downs of inventory or receivables, shows a lack of control and could sink a deal or drop down the offering price.

Buyers also want to see stability. They’re looking for confirmation that revenues, as stated in the financials, are solid and sustainable. In particular, they will be looking at client relationships, types of customers, margin trends and competitive pressures. They’ll want to see contracts to get a clear picture of how business is transacted and how often terms will need to be negotiated.

There will also be considerable attention paid to the strength of the leadership team transitioning with the business. Buyers need to have confidence that they understand the capabilities of the leadership team in place that’s going to help the new ownership take advantage of the opportunity they just bought into.

What is the deal preparation process like for business owners?

There is a lot of material that has to be pulled together for buyers ahead of a sale. Business owners who, from the start of their company, preserve and organize critical information will have a much easier time assembling it when it comes time for a sale. And from the buyer’s perspective, well-organized information increases confidence that the owner has the appropriate controls and oversight, which could lead to a higher offer.

For smaller, personally run businesses, deal preparation can be very taxing for the owner, as well as the person in the company responsible for its finances. It’s a lot of work — sometimes as much as another full-time job — and it can really pull an owner in two different directions. If the preparation is lacking and buyers see the owner is stressed just to give them standard information, it will have a negative effect on the offer. So, the more time that can be given to preparation before the desired transaction date, the better the results.

Who can sellers work with to prepare their company for a sale?

Most owners can easily find and organize the information buyers want if they give themselves enough time to prepare ahead of a sale. But when time or resources are limited, owners will need help to gather and prepare information. Owners could start by talking with their most trusted professional adviser, such as their CPA partner. They should know the business and could help get information organized or recommend a firm that has more M&A experience.

A lot of work goes into making it easy for buyers to get the data they’re looking for. The smaller the company, the more difficult it is to put that information together.

By staying consistently organized and preserving relevant information along the way, a company is not only ready to take advantage of an unexpected sale opportunity, it’s also more likely to incorporate best business practices, improving the value of the business and driving up the price. Owners who try to rush to the finish line risk having a deal fall apart during diligence, and that can stress an owner, the organization and the company’s future value.

Insights Accounting is brought to you by Clark Schaefer Hackett

Software in the cloud provides real-time data and creates efficiencies

If you haven’t recently considered how cloud accounting software can help your business function more smoothly, it may be time to do so.

“Cloud accounting software has come a long way in just the last year,” says Heather McNichols, director of accounting services, Rea & Associates Inc. “Many business owners looked at these systems a year or two ago and were not impressed. A lot has changed, and it’s definitely worth a second look.”

Smart Business spoke with McNichols about how cloud accounting software can help businesses function more efficiently and allow them to see their financials in real time, vs. relying on paper documents that could reflect data that is days or weeks old.

How does a cloud accounting software system work?

It’s an internet-based server system that does all of a business’s accounting functions, from accounts payable, to invoicing, to a general ledger, in the cloud. A year ago, it was a nice benefit to have, but during the pandemic, it can be lifechanging.

You can access the accounting software and records from any device, so you don’t have to be in the office connected to the server. Your accounts payable person can be working at home in Ohio, while your accounts receivable person is at home in Florida, and they both have access to the same data in real time. That gives employees the flexibility to work from anywhere.

What are some other benefits of cloud accounting?

The biggest benefit is decreased maintenance of a network — either you don’t need one at all, or it doesn’t need to be as big — and you don’t have to pay to have your network updated. Your data is also protected and backed up in the cloud, whereas if it is on your internal server and the server crashes, or something happens to the building, it can cost thousands of dollars to retrieve it and build a new network.

Another benefit is that you don’t have to keep up with software updates, because in the cloud, you get automatic updates to the software, so you are always working in the newest version.

How can the system increase efficiencies?

There are other applications that can be bolted on to your cloud accounting software. If you need to track employee expenses, there are apps that efficiently work with your online accounting software.

That removes a lot of manual entries and mundane tasks, and increases accuracy, because any time you have a human element in the process, there is the opportunity for errors.

Cloud accounting software also decreases search time for documents, as employees no longer need to spend time searching for files that may have been misplaced or lost, or be outdated.

And because everything is in one place, and data is updated in real time, business owners have the information they need at their fingertips. If you are in a meeting, you can pull up financials and see where things are sitting at that moment with live data.

With paper reports, you could be working off of data that is days, weeks, or even months old.

How secure are cloud accounting software systems?

The systems have a massive amount of encryption, so security is top-notch. The companies that offer these systems would be at risk themselves if data were accessed, so they take every precaution, such as double authentication, to ensure that data remains secure.

Cloud accounting software systems have come a long way and continue to evolve. Business owners owe it to themselves to at least look at them to see how they can benefit their companies.

Insights Accounting is brought to you by Rea & Associates

How to manage your sales and use tax obligations

The Wayfair decision changed the criteria that determine when a company selling goods or services can be required to collect state sales tax. But not all companies affected by the decision have complied.

“I am surprised by the number of companies that have yet to adapt, particularly companies that sell online,” says Stephen Estelle, Tax Manager at Clark Schaefer Hackett. “I continue to come across companies that have heard of Wayfair, but have done nothing about it.”

Smart Business spoke with Estelle about some of the ways companies can keep up with their sales and use tax obligations.

How does a company know where it needs to file?

To know if it has a filing responsibility, a company needs to understand state law and how it applies to the company’s activities in the state.
Wayfair expanded states’ ability to require an out-of-state company to collect the state’s sales tax. Now, states can require an out-of-state company to collect the state’s sales tax if the company has sufficient ‘economic presence’ in the state.

The most common economic threshold for a sales tax requirement is $100,000 in sales or 200 transactions in a state. The traditional parameters, however, such as whether a company has an employee presence or physical locations in the state, still apply. Complicating the situation, each state has its own parameters for determining when tax needs to be collected.

How can companies be sure they’re calculating the taxes correctly?

Calculating tax requires an analysis of state law and an understanding of the state’s sourcing rules. Depending on the state, some transactions are taxed all the time while some are circumstantially exempt.

Typically, a state will source a sale to the jurisdiction where the good is sold or delivered. Identifying that particular jurisdiction, however, can be tricky. While most states have a tax rate lookup system that enables companies to search for the correct jurisdiction and rate, it can be daunting when a company has thousands of customers with different addresses. Complete accuracy would require a check of every single transaction.

Alternatively, a company can invest in sales tax automation software. But, whether that software produces the correct result depends on whether the company gave it the correct information at the start.

What challenges are there for companies that want to handle sales and use tax compliance in-house?

There are three main challenges: personnel, cost and risk.

Calculating sales tax in-house requires at least one individual who is more than just knowledgeable about sales taxes. Companies who invest in such a person risk that person moving on and taking that knowledge with them. Also, sales tax isn’t really a full-time job. Returns are typically due around the 20th of the month, so there’s a lot of downtime for a sales tax expert.

There can also be ongoing technology costs, such as compliance and research software.

Finally, if the person handling sales tax doesn’t rise to the level of ‘expert,’ there’s increased risk that the decisions made will turn out to be incorrect and will lead to tax, penalties and interest on audit.

What are some tools companies can use to help with compliance?

Software can help, but the more the software is asked to do, the more expensive it gets. Also, the software needs to be set up correctly and checked often to ensure its accuracy, and that requires an expert.

Another option is to outsource the function or employ a hybrid solution — for instance, working with a sales tax expert on a quarterly basis to make sure filings are happening in the right states, that tax is being charged when it should be, and that it’s being calculated correctly and for the right jurisdiction.

Although it’s often the smallest item on the invoice, companies should take it seriously, especially now, because states are going to be hungry for revenue. If there is an out-of-state company that hasn’t been filing when it should have, states will be motivated to go after them.

Insights Accounting is brought to you by Clark Schaeffer Hackett

What to do when an employee contracts COVID-19

Employers operating during the pandemic have responsibilities they have not had before. They’re sometimes taking employees’ temperatures and asking them questions to determine the state of their health before they walk in the door. This is, in part, to ensure the safety of all employees working in close proximity to one another and to mitigate legal liability, but there’s another reason to be diligent now.

“Trust has to be there because people are really frightened about this,” says Peter J. Olmsted, director of executive talent solutions at Clark Schaefer Hackett. “Employers need to be as transparent as possible and put the safety and security of their employees first. If they do that, they should not have any undue legal risk.”

Smart Business spoke with Olmsted about the responsibilities employers have to their employees, legal and otherwise, through the pandemic.

How does a company typically learn an employee has contracted COVID-19?

Generally, under the Americans with Disabilities Act, you can’t ask employees certain questions about their health, except when there’s a substantial threat to the safety of employees or others. So, employers can ask their employees if they have COVID-19.

Employers could ask employees health questions as part of their screening protocol. Much like employers can require employees to have their temperature taken, they can also ask employees if they’ve come in contact with anyone known or suspected to have COVID-19 or if they’re feeling well today, and employees must respond in order to work and receive pay for that day.

What are the employer’s obligations when an employee tests positive for COVID-19?

Employers have an obligation to make sure that anyone who had any potential exposure to a person infected by COVID-19 is notified of the location and the timing of that interaction, but not the specific person’s name. That has to be kept confidential.

There are other actions employers can take that are not required but can help them to have the best outcomes while maintaining a positive culture. For example, there may not be an obligation to communicate updates to employees every day regarding COVID-19 cases, but it’s probably a good idea. If no one tested positive, tell them that as well. This can go a long way toward keeping up trust between employers and employees.

What required reporting exists for companies that have confirmed COVID-19 cases?

Employers are required to immediately report the employee, or even a customer who had the virus and was working at or visiting an employer’s facility, to the Ohio Health Department. The local health department may also require employers to identify anyone potentially exposed to those infected individuals to help facilitate contact tracing. It may also be necessary to shut down a facility and bring in professionals to do a deep cleaning, then reopening in consultation with the local health department.

What legal risks exist for a company once an employee has contracted the virus?

The liability issue has yet to be fully tested in court, but there are mistakes employers can make that would put them more at risk of being held liable. For example, if an employer doesn’t report cases to local and state health departments, it could be fined. Employers are also required to report cases to OSHA when they learn someone has entered their facility who tested positive for a COVID-19 illness. Another issue is not taking reasonable steps to protect employees — steps such as social distancing, mask wearing and regular cleanings. Employers can also get in trouble for not complying with federal or state guidelines, such as the Families First Coronavirus Response Act.

Employers should show that they care about their employees and be proactive when it comes to mitigation steps. That means staying up to date, because the laws are changing every day, and overcommunicating with employees. Consider that the actions employers take today to protect employees are going to be remembered by those employees in the future when work returns to normal.

Insights Accounting is brought to you by Clark Schaefer Hackett

Building a recovery plan for your business

Businesses have suffered massive disruptions during the COVID-19 pandemic. But smart businesses can turn that into a positive — and prepare for future disruptions — by taking a number of steps, says Tom Wolf, CPA, director, Brady Ware & Co.

“No one was prepared for what happened, economically or socially,” says Wolf. “A lot of businesses are still doing well, but a lot aren’t. And even if you’re doing well now, that could change.”

Smart Business spoke with Wolf about how to emerge stronger from this downturn and how to prepare for the next one

How can companies begin to plan for a recovery from the impact of COVID-19?

First, assess where you are. Look at the last six months and determine what went well and what didn’t. For the things that didn’t, look at whether you can make adjustments, and have a plan B and C.

For the things that went well, how can you capitalize? Consider how you can take advantage of those things, but don’t get complacent. Things can change on a dime, so don’t think that because things are going well you can rest easy.

Also look at suppliers and customers. Create a backup plan so you can accomplish what you need to. And think about whether things will return to normal, or whether this is the new normal, and adjust accordingly.

How should companies be reimagining a new business environment and culture?

Review your risk model and technology platforms to ensure you can pivot as needed. Consider the way employees work and how expectations have changed. Be flexible with your workforce and how work gets done.

The pandemic has had a significant impact on commercial real estate as companies realize they don’t need all the space they have. Many are finding they just need a central location, and not everyone needs to be in the office.

In addition, businesses that laid off employees may find they are getting the same amount of productivity with fewer people. If they continue to do well, that will also reduce the need for office space and help improve efficiencies and control costs.

What do business leaders need to understand about their financials?

When a major disruption occurs, the strength of your balance sheet determines how well you can withstand it and for how long. It should let you take advantage of opportunities and be on the offensive. With companies struggling, there may be ways to expand. Income, revenue and expenses are important, but if you lose sight of your balance sheet, you may miss an opportunity.

How can your financial partners help?

Access to financing could become more challenging, and your banker, accountant and attorney can help you model out loan covenants and modifications as needed.

They can also look at cash flow and future profitability and help you be conservatively realistic about what you can do. If you are in a position to be cautiously aggressive, your strategic partners can help guide you, because if an opportunity presents itself, you don’t want to miss it. Shore up your financial situation, work with your financial partners to project out into the future and address potential speed bumps as quickly as possible.

How can companies reinvent their marketing and sales plans?

The way we connect with people has changed. We have to find new ways to connect and adjust how we think about making connections. If you’re not in a client’s business, how do you market to them and make yourself valuable? You need to make every interaction count.

Continue to adapt every day as the world changes and the way we’ve done business no longer exists. Focus on opportunities for margin and align marketing and sales in terms of goals, revenue and process.

People became complacent and didn’t realize the magnitude of what could happen. How are you going to be prepared for next big change, whatever it is?

Insights Accounting is brought to you by Brady Ware & Company